Buy Astral Poly Technik; target of Rs 1487: Dolat Capital

Dolat Capital's research report on Astral Poly Technik

Astral Poly Technik (ASTRA) Q1FY20 numbers were in line with estimates on revenue and profitability parameters. Piping segment (including Rex) reported volume growth of 41.2% YoY and revenue growth of 37% YoY. Adhesive segment reported flattish growth due to few structural changes in Resinova, which will be corrected in current quarter and management has guided for double digit growth for FY20. Margins got impacted due to inventory losses of approx. ` 70-80 mn. We believe that inventory losses should get reversed to a large extent as PVC prices have witnessed an upward trend during on-going quarter. ASTRA is going through expansion at all its plants and is investing heavily in branding activities. We believe that these are investment phases and ASTRA will reap long term benefits of these strategies for prolonged periods atleast for the next 5 years.

Outlook

ASTRA has upped the ante on capacity expansion, distribution reach and branding initiatives. With new product addition in the Adhesive segment as well as pipe segment, we feel that revenue growth along with margin profile should get better. With high growth trajectory and expansion in return ratios, valuations will remain expensive. Reiterate Buy with a target price of ` 1,487.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More